10 June 2022 – The South African Revenue Service welcomes the unanimous judgment of the Supreme Court of Appeal (“the SCA”) which has affirmed its procedure and right to seize goods which have been under-declared when crossing South Africa’s borders.
In the case of The Commissioner of South African Revenue Services and Others v Dragon Freight (Pty) Ltd and Others dated 7 June 2022, the SCA pronounced on the exercise of SARS’ mandate in terms of the Customs and Excise Act. In this matter a review application was launched in respect of SARS’ decision to seize, in terms of section 88(1)(c) of the Customs and Excise Act, 19 of 1964 (“the Customs Act”) 19 containers imported from China which had been under-declared for customs duties on import. These containers contained textiles and clothing goods, which were flagged by SARS’ electronic risk engine, designed to counter fraud and illegal activities, which was further investigated by Customs staff.
Argument in the SCA from the Respondents was that SARS’ decision ought to be set aside on the grounds of “procedural unfairness, irrationality and unreasonableness”. The SCA wholly rejected this argument, overturned the High Court’s prior decision in favour of the agent and traders and issued a cost order in favour of SARS. The SCA ruled that SARS had acted within its mandated scope, that SARS had acted procedurally fairly and that SARS had acted on evidence gathered.
The importation of clothing and textiles (“CTFL”) has been steadily increasing since the dawn of democracy due to the availability of cheap manufactured goods outside of South Africa. In recent years, there has been widespread speculations about illegally imported clothing and textile goods in South Africa.
This case is an important reflection that SARS performs its functions for the benefit of South Africa and her people and is a reminder that SARS is an integral component in the economy. The judgment confirms that SARS is dedicated to enforcing its mandate to control the importation of certain goods to support and promote the macro-economic policy objectives of the Government.
SARS is firmly committed to service excellence and this includes not being deterred by aggressive litigation that undermines the fiscal and economic fabric of the country.
SARS is dedicated to its mandate to combat tax evasion and affirms its warning to non-compliant traders and clearing agents to desist from the practice of false declarations in attempts to defraud the state of what is due to the fiscus.
The impact of illicit activities on imports includes under-invoicing resulting in lower revenue to the fiscus given that not all customs duties and value added tax (VAT) due to the government are paid, and trade mis-invoicing involving.
SARS Commissioner Mr Edward Kieswetter expressed his satisfaction with is important decision. He said, “There are concerted attempts by those engaged in these illicit activities to circumvent the support put in place by government for local industries thereby eroding productive capacity in the country with accompanying job losses, particularly in the local manufacturing sector. This limits the country’s potential to grow and create jobs, and leads to unfair competition for legitimate trade”.
In conclusion, he said, “SARS is continually refining its capacity to detect this non-compliant behaviour, and will do all in its power to make it costly to non-compliant taxpayers, while facilitating legitimate trade”.
Finally, the Commissioner thanked the Department of Trade, Industry and Competition, the textile and clothing industry and the Trade Union in the sector for their valuable contribution in this success.
For further information, please contact [email protected]